Is it best to avoid a listing that says no SPDS or CLUE? What exactly do these terms mean?

Asked by Gail, 19115 Wed Jul 23, 2008

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Michael Krot…, Agent,
Wed Jul 23, 2008
Hi Gail,

SPDS stands for - Seller's Property Disclosure Statement
CLUE stands for - Claim Loss Underwriting Exchange or Comprehensive Loss Underwriting Exchange (depends on the state)

A SPDS is something that is filled out by a homeowner where they disclose any issues they have had with the house, or issues that they know about that were disclosed to them by a previous owner. Some examples would be: a leaky roof, broken window, cracked drywall, etc. The SPDS form is several pages long and asks very specific questions so if they owner has any knowledge they are required to disclose it. The prospective homebuyer then has a change to review these SPDS.

The C.L.U.E. report provides a five year history (sometimes longer) of losses associated with an individual and his/her personal property. It is basically in place to show to the prospective homebuyer that the house is insurable (e.g. hasn't had major issues in the recent past that would cause home insurance companies to not offer coverage).

In you're question I'm going to assume that you are speaking about bank-owned properties; many times the property description reads as "no SPDS or CLUE provided." SPDS are usually not provided because the bank/lender never actually lived in the house and therefore they can't offer any insight as to the condition(s) of the house. The same verbiage is often used for investment properties or rentals where the owner doesn't actually occupy the property.

CLUE reports must be ordered by the seller and if there is no CLUE report provided I would writing a clause into the contract that essentially states that a CLUE will be provided by a certain time (well before closing); if the home is not insurable most buyers wouldn't want to buy.

Hope this helps!
5 votes
Steve Belt, , Scottsdale, AZ
Wed Jul 23, 2008
SPDS refers to Seller Property Disclosure Statement and CLUE refers to a clue report from the insurance company for the property.

The SPDS is filled out by the owner, and gives a history of the home for anything that the current owner knows about. Was there ever a plumbing leak? Electrical problem? Airport noise? That sort of thing.

The CLUE report comes from the current insurance company is gives a claims history. Your current insurance company may care about the past claims on the property, as this may affect your rates, or even your ability to get coverage.

If both are not provided by a seller, it is likely a bank owned property. Banks don't know the history of repairs/problems, and have never lived there to tell you if they've seen rodents, pests, or heard noises. They also don't have an insurance history.

The lack of these 2 things simply places greater burden on you doing your own proper and thorough due diligence. Don't skimp on any inspection, if you are considering a bank owned property.
4 votes
Rob & Cather…, Agent, Tucson, AZ
Sat Nov 8, 2008
SPDS is an acroynm for Sellers Property Disclosure Statement. It is a legal document where sellers answer questions and provide information on the condition & history of the home, as well as information on the area. utilities & services.
CLUE is an acronym for Comprehensive Loss Underwriting Exchange, which is a fancy name for a Property Insurance Database. All major insurance companies regularly submit claims information to the CLUE. A CLUE Report shows all claims made on the property in the past 5 years, which is very useful information when buying a home.

Lenders that obtain properties through foreclosure often state that they will not provide a CLUE or SPDS as they (1) Do not want to be liable for providing or not providing information on the property, and (2) Probably know very little about the property anyway.

Sometimes the current Owner will not provide a SPDS because they may have acquired the property as a gift or due to a death in the family. Investors that have rented and never lived in the property may also advertise "No SPDS".

Should you stay away from those homes? Not necessarily. Usually they are priced below market and may be a bargain. What is most important is that you must have the property thoroughly inspected by a professional or several professionals as needed to determine as best as possible the condition of the home.

If repairs are required, try to get an estimate of the cost and use that when calculating the total cost of the home. For example, if the pruchase price is $200,000 but the home needs $10,000 in repairs, your actual cost is $210,000. Use this amount to compare with similar homes that have either sold or are currently active in the area.
3 votes
Anne Mckechn…, , 85718
Wed Jul 23, 2008
Hi Gail,

SPDS as already indicated stands for Sellers Property Disclosure Statement and the CLUE for Claim Loss Underwriting Exchange.
In Arizona the CLUE became part of our contract a few years ago as a means for the buyer, during the inspection period, to elicit the cost of insurance of the home based on prior claims.
Before the CLUE was available, many people were through the 10 day inspection period, and then tried to obtain home owners insurance only to find that they were going to get charged a small fortune for Home Owners Insurance based on the prior claims history of the home. At this point, they were unable to cancel the Contract.
The one thing that I would also do is check with the State as they do have prior record of termite treatments on homes, as well as perform a home inspection, and mold, structural, if indicated by the inspector
An investor if they have a Note, may still have home owners insurance and may be able to provide a CLUE.
A bank will not provide one as they will have no record of insurance claims.
Most homes that do not have a SPDS or a CLUE are bank owned or investor owned homes that have not been lived in by the current seller.
If the home happens to be a newly built home from a Builder who is no longer in business, you can also check with the Registrar of Contractors to see if the Home builder had any complaints.
Finally as already mentioned you should make sure that you perform Home inspections as indicated by the Home Inspector.

Good Luck :)

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2 votes
Heidi Guyton, Agent, Tucson, AZ
Wed Jul 23, 2008
In todays market if there are no SPDS (seller property disclosure statement ) or CLUE (comprehensive loss and underwriting exchange report), it usually means the home is bank owned (a forclosure). It could also mean it was a rental, children are selling it for a deceased parent, among other things. There usually isn't any reason to avoid these homes, just be diligent, have a home inspection. The CLUE report shows if there are any losses claimed on the insurance company, the SPDS are disclosures about the home by the sellers.
1 vote
Michael Fabb…, Agent, Scottsdale, AZ
Sat Jan 11, 2014
This is one think I HATE seeing of Fix and Flip properties and I would definitely be leery if this is what you are looking for. For people fixing and flipping a home, I find it very hard to believe that once they do a renovation the owner of the property doesn't have any communication with the contractor doing the work who would tell them of any problems etc. Or better yet, they don't go by the property to check up on the progress. Even if they have a project manager that manages the work for them I would want to know of any issues or potential issues to know weather or not to spend the money to fix.

Every offer I've put in for clients that are interested in these homes I have ALWAYS put in that SPDS are to be included. When questioned by the sellers agent, I explain exactly what I stated above. Most of the time I do get something back, other times not; but I PROTECT MY BUYERS INTEREST AT ALL TIMES!!!

Also, investment homes where the "owner never lived in the property". As an owner of many investment properties myself and property manager of a few others, I can say without a doubt that when a tenant has an issue they call the property manager or owner. Therefore, they will know about issues in the home. As a property manager, many small things get taken care of (which wouldn't always be on the SPDS anyway). But you can bet before I spend any considerable about of money on repairs I will get the OK from the owner.

Now this may not be the case for everyone but it's just something to consider when you see that on listings.

If they aren't willing to give me a SPDS then that is usually a red flag for a flipped home.

Bank Owned and others are different, I'm particularly speaking on two specific instances.

Please feel free to correct me if I'm out of line!
0 votes
Frances Flynn…, , State College, PA
Fri Aug 29, 2008
Banks and other mortgage lenders are exempt from seller disclosure laws when they take a property in a foreclosure action. Summarily dismissing listings that do not have SPUDS and CLUE reports leaves a buyer at a disadvantage when (s)he is looking for a bargain. It underscores the importance of hiring a good, qualified home inspector and/or other contractor(s) to ascertain the condition of the property and the likelihood that repairs will be necessary.

CAVEAT EMPTOR (Buyer Beware) was never more important than it is now in a market where there is a larger percentage of vacant and bank-owned properties.
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